Joel Cummings vs Eureka Restaurant Group LLC

Case Number

18CV00849

Case Type

Hearing Date / Time

Fri, 11/17/2023 - 10:00

Nature of Proceedings

CMC; Preliminary Injunction

Tentative Ruling

For the reasons set forth herein and in accordance with this ruling, plaintiff’s motion for an order granting preliminary approval of class action settlement is granted. Counsel shall appear at the hearing on the motion and shall be prepared to discuss scheduling for the final settlement hearing and any other matters remaining for the court at this time.

Background:

The first amended complaint (FAC) filed by plaintiff Joel Cummings in this matter on March 22, 2018, on behalf of himself and others similarly situated, alleges six causes of action against defendant Eureka Restaurant Group LLC: (1) failure to provide meal periods; (2) failure to provide rest periods; (3) unfair competition; (4) failure to provide accurate wage statements; (5) failure to pay all wages owed upon termination; and (6) civil penalties under Labor Code section 2699 (the Private Attorneys General Act of 2004 or PAGA).

As alleged in the FAC, plaintiff worked at defendant’s Santa Barbara restaurant as a non-exempt employee from February 2016 to June 2017. During his employment with defendant, plaintiff and other similarly situated nonexempt employees worked between five and six hours each workday but were not provided with any meal or rest periods. Plaintiff did not consent to any meal period waiver. Defendant also failed to provide accurate wage statements and failed to pay all wages owed upon termination.

On May 8, 2018, defendant filed an answer to the FAC generally denying its allegations and asserting forty-three affirmative defenses.

On November 23, 2022, plaintiff filed the present motion for preliminary approval of a proposed settlement and for preliminary certification of the proposed settlement class for settlement purposes. In the motion, plaintiff also seeks leave to file a second amended complaint (SAC), a copy of which is attached to the notice of the motion as exhibit no. 1. No opposition or other response has been filed to the motion for preliminary approval.

Analysis:

“A settlement or compromise of an entire class action, or of a cause of action in a class action, or as to a party, requires the approval of the court after hearing.” (Cal. Rules of Court, rule 3.769(a).) “Any party to a settlement agreement may serve and file a written notice of motion for preliminary approval of the settlement. The settlement agreement and proposed notice to class members must be filed with the motion, and the proposed order must be lodged with the motion.” (Id., rule 3.769(c).)

To protect the rights of class members including the named plaintiff, the court must determine if the proposed class action settlement is fair, adequate, and reasonable. (Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794, 1800–1801 (Dunk).) The court considers relevant factors including “the strength of [plaintiff’s] case, the risk, expense, complexity and likely duration of further litigation, the risk of maintaining class action status through trial, the amount offered in settlement, the extent of discovery completed and the stage of the proceedings, the experience and views of counsel, the presence of a governmental participant, and the reaction of the class members to the proposed settlement.” (Id. at p. 1801.) The court’s inquiry is limited “ ‘to the extent necessary to reach a reasoned judgment that the agreement is not the product of fraud or overreaching by, or collusion between, the negotiating parties, and that the settlement, taken as a whole, is fair, reasonable and adequate to all concerned.’ [Citation.]” (Ibid.)

“[A] presumption of fairness exists where: (1) the settlement is reached through arm's-length bargaining; (2) investigation and discovery are sufficient to allow counsel and the court to act intelligently; (3) counsel is experienced in similar litigation; and (4) the percentage of objectors is small.” (Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794, 1802.) “Public policy generally favors the compromise of complex class action litigation.” (In re Microsoft I-V Cases (2006) 135 Cal.App.4th 706, 723, fn. 14.)

With regard to settlements of claims brought under Labor Code section 2699 (the Private Attorneys General Act of 2004 or PAGA), “while PAGA does not require the trial court to act as a fiduciary for aggrieved employees,” the court applies the same factors and standards of review to evaluate the fairness of a PAGA settlement. (Moniz v. Adecco USA, Inc. (2021) 72 Cal.App.5th 56, 76-77; Lab. Code, § 2699.)

California Rules of Court, rule 3.769, sets forth the procedure for settlement of a class action before class certification. “In that case, certification and settlement approval occur simultaneously.” (Luckey v. Superior Court (2014) 228 Cal.App.4th 81, 93.) Under this procedure, a party to the settlement files a motion for preliminary approval which must include the settlement agreement and proposed notice to the class members, and lodges a proposed order. (Cal. Rules of Court, rule 3.769(c).) After a preliminary settlement hearing, the court makes “an order approving or denying certification of a provisional settlement class….” (Cal. Rules of Court, rule 3.769(d).) If the court grants preliminary approval of the settlement, the court’s order must include “the time, date, and place of the final approval hearing; the notice to be given to the class; and any other matters deemed necessary for the proper conduct of a settlement hearing.” (Cal. Rules of Court, rule 3.769(e).)

On November 6, 2023, the parties to this matter filed a joint stipulation of class action and representative action for PAGA penalties (the joint stipulation). The joint stipulation provides for a settlement to a class of persons (the Class Members) who worked for defendant as a non-exempt employees in the State of California at any time between February 20, 2014 through August 11, 2017 or December 18, 2020 through August 31, 2023 (the Class Period). (Joint Stip., ¶¶ 18, 20, 56.) The joint stipulation also provides for a settlement to persons who worked for defendant in California in a nonexempt hourly-paid position (the PAGA Members) from January 11, 2017 through August 11, 2017 and December 18, 2020 through August 31, 2023 (the PAGA period). (Joint Stip., ¶¶ 36-39.)

Pursuant to the joint stipulation, defendant will make a one-time payment in the amount of $450,000 (the Maximum Settlement Amount) to Atticus Administration, LLC (the Settlement Administrator) within 30 calendar days of the effective date of the joint stipulation. (Joint Stip., ¶¶ 25, 54.) The Maximum Settlement Amount was agreed to by plaintiff and defendant based on the aggregation of the agreed-upon settlement value of individual claims, does not include defendant’s share of payroll taxes on individual settlement payments (which will be paid separately), and is non-reversionary. (Joint Stip., ¶ 31.)

The Maximum Settlement Amount includes individual payments to each participating Class Member, a service award to plaintiff not to exceed $4,500 as approved by the court (the Service Award), claims administration costs to be paid to the Settlement Administrator and not to exceed $36,000 (the Administration Costs) as approved by the court, a payment in the amount of $20,000 which will be allocated to the resolution of Class Member claims that arise under PAGA (the PAGA payment) as further discussed below, attorneys’ fees not to exceed one-third of the Maximum Settlement Amount or up to $150,000 payable to the Karasik Law Firm and D.Law, Inc. (collectively, Class Counsel) as approved by the court, and costs payable to Class Counsel and not to exceed $13,500 as approved by the court. (Joint Stip., ¶¶ 13, 14, 15, 16, 30, 49, 56-58, 60.)

The entirety of the Maximum Settlement Amount that remains after deducting the Service Award, the Administration Costs, the PAGA payment, and attorney’s fees and costs as approved by the court (the Net Settlement Amount) will be allocated to paying each individual participating Class Member’s share of the Net Settlement Amount (the Individual Settlement Allocation), less withholding taxes and other applicable payroll deductions required by law. (Joint Stip., ¶ 29, 32, 62.)

Each individual payment of a participating Class Member’s share of the Net Settlement Amount (the Individual Settlement Payment) will be calculated and apportioned based on the number of weeks each Class Member worked for defendant during the Class Period (the workweek). The Settlement Administrator will calculate the total number of workweeks worked by each Class Member and the total number of workweeks worked by all Class Members during the Class Period. Each Individual Settlement Payment will be determined based on the following formula: the number of workweeks that the Class Member was a member of the class during the Class Period divided by the total number of workweeks that every Class Member was a member of the class during the Class Period, then multiplied by the Individual Settlement Allocation. The Individual Settlement Payment will be reduced by any required deductions for each participating Class Member including all applicable tax withholdings or deductions. Any applicable tax withholdings or other required deductions will be paid from the Net Settlement Amount. (Joint Stip., ¶ 63.)

Each Individual Settlement Payment will be allocated as follows: 20 percent as unpaid wages, and 80 percent as civil penalties and interest. (Joint Stip., ¶ 81.) The Settlement Administrator is responsible for issuing necessary tax forms and forwarding all payroll taxes and penalties to appropriate government authorities. (Joint Stip., ¶ 83.)

Seventy-five percent or $15,000 of the PAGA payment will be paid to the California Labor & Workforce Development Agency (the LWDA), and the remaining twenty-five percent or $5,000 will be paid to the PAGA Members (the PAGA Settlement Allocation). (Joint Stip., ¶¶ 30, 37-38.) PAGA Members will receive payment from the PAGA Settlement Allocation based on their equitable share which will be calculated as follows: the number of workweeks that employee was a member of the PAGA Claim Period divided by the total number of workweeks that every PAGA Member was a member of the PAGA Claim Period, multiplied by the PAGA Settlement Allocation. (Joint Stip., ¶ 63.)

Within 30 calendar days of preliminary approval, defendant will provide a complete list of all Class Members and PAGA Members (the class list) to the Settlement Administrator. (Joint Stip., ¶ 66.) Within fourteen calendar days after receiving the class list from defendant, the Settlement Administrator will mail a Notice of Settlement of Class Action in the form attached to the joint stipulation as Exhibit A (the class notice) to all Class Members by regular mail using the most current mailing addresses identified in the class list. (Joint Stip., ¶ 67.)

Before mailing the class notice, the Settlement Administrator will perform a search of the National Change of Address Database or other similar service, in order to update and correct the class list for any known or identifiable address changes. (Joint Stip., ¶ 68.) Any class notice that is returned to the Settlement Administrator as non-deliverable within forty-five days from the initial mailing will be sent via regular mail to the forwarding address affixed thereto and the Settlement Administrator will indicate the date of such remailing on the class notice. (Joint Stip., ¶ 68.) If no forwarding address is provided, the Settlement Administrator will attempt to determine the correct address using a skip-trace or other search and will perform a single re-mailing within five calendar days of receiving the returned mail. (Joint Stip., ¶ 68.)

The class notice attached to the joint stipulation as Exhibit A includes information regarding the nature of this lawsuit, a summary of the claims made by plaintiff, a summary of the principal terms of the joint stipulation, a description of the Class Period and the settlement class, the approximately number of persons in the settlement class, the total number of workweeks each respective Class Member worked for defendant during the Class Period, each Class Member’s estimated Individual Settlement Payment, instructions for disputing the number of workweeks and the manner in which the Settlement Administrator will make a final determination regarding the correct number of workweeks, instructions for submitting valid objections to the joint stipulation or a Request For Exclusion, deadlines by which Requests For Exclusion must be submitted, a statement of the claims to be released by each Class Member, and the date of the final approval hearing. (Joint Stip., ¶ 69, 70 & Exh. A.)

Class Members may only exclude themselves from the non-PAGA claims. (Joint Stip., ¶ 47.) Class Members may opt out of the non-PAGA claims and joint stipulation by signing and either mailing or faxing a written letter to the Settlement Administrator requesting to be excluded from the settlement (the Request For Exclusion) within forty-five calendar days from the initial mailing of the Class Notice by the Settlement Administrator. (Joint Stip., ¶¶ 47, 48, 72.) To the extent a Request For Exclusion is defective, the Class Member will be given an opportunity to cure any defects. (Joint Stip., ¶ 73.)

Class Members who do not affirmatively opt out of the joint stipulation by submitting a timely and valid Request for Exclusion will be bound by all of its terms. (Joint Stip., ¶ 74.) If a Class Member excludes themselves from the non-PAGA settlement, that Class Member will not receive any share of the settlement proceeds, will not be bound by the joint stipulation, and will not have any right to object, appeal or comment. (Joint Stip., ¶¶ 32, 72.) PAGA Members who request exclusion will receive their equitable share of the PAGA Settlement Allocation. (Joint Stip., ¶ 72.)

Class Members may also object to the joint stipulation by submitting a written notice of objection to the Settlement Administrator within forty-five calendar days from the initial mailing of the Class Notice by the Settlement Administrator. (Joint Stip., ¶ 48, 75.)

Not later than forty-five calendar days after the effective date of the joint stipulation, the Settlement Administrator will issue payment to the participating Class Members, plaintiff, Class Counsel, the LWDA, and to itself for any court approved services performed in connection with the settlement. (Joint Stip., ¶ 56, 58.) Separate checks will be issued by the Settlement Administrator for the Individual Settlement Payments and the PAGA settlement payments. (Joint Stip., ¶ 71.) The Settlement Administrator is also responsible for appropriate deductions and reporting obligations. (Joint Stip., ¶ 71.)

The settlement checks issued by the Settlement Administrator will expire one hundred and eighty calendar days from the date they are issued. (Joint Stip., ¶¶ 71, 78.) Uncashed settlement checks will be cancelled and not re-issued. (Joint Stip., ¶¶ 71, 78.) Participating Class Members who do not cash their settlement check will remain bound by the court’s judgment entered in this action. (Joint Stip., ¶ 78.) Settlement funds remaining from uncashed settlement checks will be donated to the Legal Aid Foundation of Santa Barbara County. (Joint Stip., ¶¶ 71, 78.)

In addition, and solely for the purpose of settling the present action, plaintiff shall file the SAC for the purpose of conforming plaintiff’s allegations with the scope of the claims released by the joint stipulation and to clarify that the scope of the class includes all non-exempt employees who worked for defendant during the Class Period without limitation to the number of hours they worked, and to clarify the scope of the Class Period and PAGA Period. (Joint Stip., ¶ 51 & Exh. B.) The SAC shall be filed within five (5) days alter notice of the court’s order granting preliminary approval of the joint stipulation. (Joint Stip., ¶ 52.) Defendant shall not have any obligation to file a response to the SAC and the parties agree that defendant shall not be deemed to have admitted any facts or waived any defenses by not filing a response to SAC. (Joint Stip., ¶ 52.)

Upon the effective date of the joint stipulation, plaintiff and all Class Members will be deemed to have fully, finally and forever released, settled, compromised, relinquished, and discharged Eureka Restaurant Group, LLC, and all its present and former parent companies, subsidiaries, divisions, professional employer organizations, related or affiliated companies, shareholders, officers, directors, employees, agents, attorneys, insurers, successors and assigns (the Released Parties) from all claims that could have been pleaded based on the facts alleged in the SAC during the Class Period and the PAGA period. (Joint Stip., ¶¶ 44, 45, 45, 46, 59, 87.)

In support of the motion, plaintiff submits the declaration of his counsel Gregory N. Karasik who declares that on October 16, 2018, a complaint which alleged claims similar to those asserted by plaintiff here was filed against defendant for civil penalties under PAGA in a case counsel generally refers to as the “Whittington case”. (Karasik Decl., ¶ 7.) A settlement in the gross amount of $200,000 was reached in the Whittington case which resulted in the filing of a first amended complaint in that action on June 8, 2021, which added class action allegations that were limited to the liability period for civil penalties under PAGA. (Ibid.) Final court approval of the settlement in the Whittington case was granted on December 23, 2021. (Ibid.) The settlement in the Whittington case releases claims during the period from August 17, 2017, through December 17, 2020. (Ibid.)

After final approval of the settlement in the Whittington case was granted, plaintiff and defendant in this action discussed a proportional settlement on behalf of the class members whose claims were not released by the settlement in the Whittington case. (Karasik Decl., ¶ 8.) Plaintiff propounded preliminary discovery in July 2022 to which defendant responded in part in September 2022. (Ibid.) After defendant changed counsel, the parties in the present action agreed to suspend further discovery and the resolution of discovery disputes pending mediation with the goal of reaching a settlement proportional to the settlement in the Whittington case. (Ibid.)

The parties participated in a mediation on June 28, 2023 before the Hon. Diane Wayne (Ret.) which resulted in agreement on the material terms of a class action and PAGA settlement. (Karasik Decl., ¶ 9.) Following further negotiations regarding settlement details, the parties ultimately executed the joint stipulation for which plaintiff now seeks preliminary approval. (Ibid.)

There are approximately 8,087 Class Members and approximately 6,275 PAGA Members. (Karasik Decl., ¶ 10.) After all deductions are made from the Maximum Settlement Amount as further discussed above, the approximate amount of $226,000 will be distributed to the Class Members and $5,000 will be distributed to the PAGA Members. (Id. at ¶ 11.) The average amount of gross settlement benefits recovered for each Class Member is approximately $56. (Ibid.)

Plaintiff’s counsel states that the risk and uncertainty of continued litigation led him to reasonably conclude that a settlement on the terms described above would be in the best interests of the class. (Karasik Decl., ¶ 11.) Because defendant contends that all its employees signed arbitration agreements with class action waivers during their onboarding process, defendant had a strong arbitration defense to class certification notwithstanding that plaintiff defeated defendant’s motion to compel arbitration in this matter. (Id. at ¶ 12.) ) Though counsel calculated, based on the information provided by defendant, that defendant theoretically faced approximately $5.2 million in liability for meal period and rest period violations, plaintiff’s class action claims had low settlement value because it would have been extremely difficult to prevail on a contested motion for class certification. (Ibid.) Therefore, it is counsel’s opinion that the settlement reflects a fair result in light of the difficulties plaintiff would have had in achieving class certification and prevailing on the merits of his claims. (Ibid.)

Plaintiff’s counsel also calculated that defendant theoretically faced liability of approximately $10 million with respect to plaintiff’s PAGA claims. (Karasik Decl., ¶ 13.) However, counsel believes plaintiff’s PAGA claims had a low settlement value because: (1) defendant’s written meal period and rest period policies were legally compliant on their face; (2) defendant required employees to sign meal period waivers and most class members worked shifts of less than 6 hours; (3) defendant was not required to keep records of employee rest periods making it extremely difficult to establish that the press of business prevented employees from taking rest periods; and (4) courts have discretion to reduce PAGA penalties. (Ibid.)

Counsel further declares that plaintiff’s claims are typical of the claims he asserts on behalf of the Class Members and that plaintiff has no conflict of interests with other class members. (Karasik Decl., ¶ 15.) Plaintiff will submit a declaration attesting to the reasons he is an adequate class representative upon seeking final approval of the joint stipulation. (Ibid.) Furthermore, plaintiff undertook the risk and burden of litigation including the risks of having to pay costs and attorney’s fees and of potential blacklisting for suing an employer, and participated in the mediation. (Id. at ¶ 16.) Plaintiff will submit a declaration attesting to the time he devoted to this case upon when plaintiff requests an enhancement in connection with final approval of the settlement. (Ibid.)

Counsel also declares that the attorney’s fee request is typical of those sought in wage and hour class actions under both the percentage of the fund and lodestar approach. (Karasik Decl., ¶ 17.) At the outset of this litigation, plaintiff signed an agreement pursuant to which he was expressly advised of and consented to a fee split providing that 65 percent of fees awarded shall be allocated to Karasik Law Firm and 35 percent to Davtyan Professional Law Corporation (which subsequently changed its name to D.Law, Inc.). (Id. at ¶ 18.)

Code of Civil Procedure section 382 authorizes class actions “when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court, one or more may sue or defend for the benefit of all.” (Code Civ. Proc., § 382.) “Class certification requires proof (1) of a sufficiently numerous, ascertainable class, (2) of a well-defined community of interest, and (3) that certification will provide substantial benefits to litigants and the courts, i.e., that proceeding as a class is superior to other methods. [Citation.]” (Fireside Bank v. Superior Court (2007) 40 Cal.4th 1069, 1089.)

To determine whether a class is ascertainable, the court examines “(1) the class definition, (2) the size of the class, and (3) the means available for identifying class members. [Citation.]” (Reyes v. San Diego County Bd. of Supervisors (1987) 196 Cal.App.3d 1263, 1271.) “A related inquiry is manageability of the proposed class[.]” (Global Minerals & Metals Corp. v. Superior Court (2003) 113 Cal.App.4th 836, 849.) “The community of interest requirement embodies three factors: (1) predominant common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class.” (Richmond v. Dart Industries, Inc. (1981) 29 Cal.3d 462, 470.) “The burden is on the party seeking certification to establish the existence of both an ascertainable class and a well-defined community of interest among the class members.” (Washington Mutual Bank, FA v. Superior Court (2001) 24 Cal.4th 906, 913.)

“Because a court evaluating certification of a class action that settled prior to certification is considering certification only in the context of settlement, the court's evaluation of the certification issues is somewhat different from its consideration of certification issues when the class action has not yet settled. In some ways, the court's review of certification of a settlement-only class is lessened; as no trial is anticipated in a settlement-only class case, ‘the case management issues inherent in the ascertainable class determination need not be confronted.’ [Citation.] However, other certification issues, ‘those designed to protect absentees by blocking unwarranted or overbroad class definitions’ require heightened scrutiny in the settlement-only class context ‘for a court asked to certify a settlement class will lack the opportunity, present when a case is litigated, to adjust the class, informed by the proceedings as they unfold.’ [Citation.]” (Luckey v. Superior Court (2014) 228 Cal.App.4th 81, 93–94.) To protect absent class members whose rights may not have been considered by the settling parties, and to ensure the absence of fraud and collusion, heightened scrutiny is required if there has been no adversary certification. (Ibid.)

Plaintiff has presented evidence that there is a numerous, ascertainable class with a well-defined community of interest consisting of at approximately 8,087 employees of defendant who were subject to meal and rest break violations. There also appears to be sufficient and reliable means available to identify class members from defendant’s records. The class representative appears to have claims typical of the class and appears to be able to adequately represent the class. While defendant was named in the Whittington case in which claims similar to those alleged here were asserted, the SAC amends the allegations to omit claims arising during the class period at issue in the Whittington claim. Based on the above, there appears to be reasonable support for provisional certification of the settlement class.

Plaintiff has conducted discovery to which defendant has responded. Plaintiff has presented evidence as further discussed above regarding the approximate amount of the settlement payments to be issued to the Class members and PAGA Members. In evaluating the adequacy of the settlement, plaintiff’s counsel also accounted for potential difficulties associated with achieving class certification and prevailing on the merits of plaintiff’s claims in this action, in particular with regard to the purported signing of arbitration agreements by defendant’s employees and the existence of class action and meal period waivers.

The settlement is the product of a mediation and subsequent negotiations regarding the details of the settlement. The release is limited to claims based on or related to the facts alleged in this action only including facts underlying plaintiff’s claim for penalties under PAGA. Plaintiff has presented evidence of the risks of uncertainty associated with litigation with respect to the defenses asserted by defendants and potential difficulties in certifying the class. These risks appear to be substantial.

Based on the information provided in the Karasik declaration and the declaration of Karasik’s co-counsel attorney Emil Davtyan, plaintiff’s counsel has substantial experience with wage and hour and PAGA matters. Class Counsel believes that the settlement is fair, adequate, and reasonable. Based on the above and the evidence presented in the motion, it appears to the court that the settlement is fair, adequate, and reasonable, and in the best interests of the Class Members in light of known facts and circumstances, and not the product of collusion.

Based on the evidence presented, the court finds that the settlement as set forth in the joint stipulation is in all respects fair, reasonable, adequate and in the best interests of the putative class. The court further finds that the notice plan set forth in the settlement agreement constitutes sufficient notice to the Class Members of the present class action and the terms of the settlement agreement as well as the date of the final settlement hearing. The court will determine the reasonableness of attorney’s fees and costs as well as plaintiff’s Service Award upon noticed motion at the final settlement hearing.

The court determines that the settlement is entitled to preliminary approval, that the settlement class should be provisionally certified, that plaintiff’s counsel should be appointed as counsel for the settlement class, and that the notice to the class and administration should be approved as set forth in the motion. Accordingly, the motion for preliminary approval of class actions settlement will be granted. Counsel shall appear at the hearing of the motion and shall be prepared to discuss scheduling for the final settlement hearing and any other matters remaining at this time.